No end in sight for Zimbabwe’s economic woes

‘It’s a disaster. It’s as bad as any economy I’ve seen.’

NOMPU SIZIBA: The Zimbabwean economy is in dire straits. Inflation has started ratcheting up again with levels of 50% now being bandied about. It’s said that over 80% of Zimbabweans are unemployed while public servants are poorly paid. People’s incomes are not rising in line with inflation, and this is having serious socioeconomic impacts on that society. Zimbabwe’s president, Emmerson Mnangagwa, was out in Europe, looking for aid. It’s not clear what he managed to secure. In the meantime his finance minister says his reform programme is on track and Zimbabwe will recover in due course.

Well, to break down the Zimbabwe story I’m joined on the line by veteran freelance journalist, Barry D Wood, who has been covering that country for over three decades. Barry, thanks very much for joining us. What’s happening on the ground in Zimbabwe in terms of food availability on the shelves and affordability? And did the fuel-price increase earlier this year dramatically reduce demand for it, and [reduce] those long, snaking queues?

BARRY WOOD: Hello, Nompu. It’s a delight to talk to you. I think the answer to your question is that it’s a disaster. It’s as bad as any economy I’ve seen. You asked about food. Yes, there is some availability, but the people don’t have enough money to purchase it. You’ve had a 67% increase in the food price. Today there are shortages of bread in Harare and in Bulawayo. That is a real problem.

You had a few questions there. Why don’t you repeat one of the key ones, and I’ll address that?

NOMPU SIZIBA: [Chuckling] Yes. I think you’ve answered all of them. There is food availability, you say, but people can’t afford it – they don’t have enough money.

The third question was really around the fuel price, the extent to which that has contracted demand in that economy.

BARRY WOOD: Yes, that’s very important , because just about two-and-a-half weeks ago we had this more than doubling in the fuel price, and that was indeed intended both to produce revenue for the government in excise tax, and to alleviate the fuel queues, which it did. They had stretched on for kilometres, causing great frustration. That had its intended effect in terms of getting rid of the queues, mainly because people could not afford to buy fuel. So you are finding people having to pay more to ride the minibuses, and they are having to park their cars because they don’t have enough money to buy fuel. And indeed there are still people coming across from Botswana, from Mozambique, from South Africa to fill up their tanks, because they use the black-market rate for the currency and then use that to buy fuel that is cheaper than it is at home. So it’s an awful mess.

NOMPU SIZIBA: We know that Zimbabwe has been suffering from liquidity issues for a long time. What essentially has been the basic problem, and what role have technology services like Econet played in helping to overcome the issue?

BARRY WOOD: Let me talk about the Econet, for just a moment, and talk about the problem of currency. You don’t have monetary stability. Anybody, whether a family, an individual, or a company, requires stability so they can make plans and use their money, if they have some, sensibly. Listeners will know that in 2008/9 the Zimbabwe currency imploded so that it had the world’s highest rate of hyperinflation. Hyperinflation is defined as “inflation of more than 50% a month”.

So they went to the US dollar. Now, that might have been a mistake because the dollar went up in value that priced Zimbabwean exports out of its export market.

Then, about three or four years ago they introduced this bond-note business. The bond note was introduced at 1:1. It wasn’t called the Zimbabwean dollar, because the Zimbabwean people knew enough about the previous Zimbabwean dollar; they wouldn’t use it. Well, the bond note held its value for a while, but now it’s no longer 1:1; it is 4:1.

Then you have this rather ridiculous system called RTGS, which is real-time gross settlement; that is a financial account, a bank transfer. So you could say that Zimbabwe has three monies and people have to scramble to try to make sense of it.

You mentioned liquidity, Nompu. Indeed there aren’t enough US dollars because they have a trade deficit, they have a fiscal deficit, and the bond notes have collapsed in value.

NOMPU SIZIBA: Finance minister Mthuli Ncube has a reform programme in place with some supporting it, saying Zimbabwe will have to go through the necessary pain in the short term, some of the pain that you’ve just described. What is the reform programme all about, and at what juncture does it seek to resolve the foreign exchange problem?

BARRY WOOD: Right. If you go back to the coup against Robert Mugabe, November 17 [2017], people were so hopeful, and you suddenly had a lot of freedom that you didn’t have under Mugabe. People were hopeful of a better life. When Ncube was brought in – he’s an eminent economist, highly respected, he has taught at Wits, he has been the chief economist at the African Development Bank – people had high hopes for him. But people I talk to in Harare are very disappointed. He spends too much time on Twitter. He has had great difficulty in making the transition from being an academic economist to a policy-maker. Yes, he has a reform programme, he wants a new money. But of course, saying so caused people to think: hold it, the new money is coming, this bond note must be really worthless. So that caused the bond note to go down even further.

What is his programme? He wants to open the economy. He can’t open the economy unless he has financial reserves to back up the new currency that he says will be introduced in 2019. You can’t get international support as long as people are being beaten in the street and killed for protesting. This is the conundrum. This is why no one, Nompu, is optimistic in the short term about the Zimbabwean economy.

NOMPU SIZIBA: That was going to be my next question – about the crackdown and the violence and even the deaths. We heard that at least 12 people died following the protest when the fuel price increases were announced. Obviously that is not going to augur well for confidence among the likes of the IMF, the International Monetary Fund. Are they really going to put their money with a regime which is still brutalising its people? You’ve addressed that, I guess.

So, is there any optimism on your part after President Mnangagwa invited members of the opposition to meet with him today [Thursday] to map out a framework?

BARRY WOOD: That’s a nice first step, a very good first step. But I’m afraid the crisis has reached such a proportion that there is more required. There probably has to be a national government of some sort. You see, Ncube is not going to be able to make these reforms work, let alone bring in any currency, unless he has international monetary support coming to him in real, hard currency. That may not be used, but if it’s there it communicates to the people that there is going to be monetary stability.

Well, the problem is, the Americans, who have a veto power in the International Monetary Fund, have a list of sanctions against individuals, including the president and the vice-president. And the crackdown which you mentioned – and I’ve been on the phone to Harare today – there’s been more crackdown, and a brutal beating of a demonstrator. The army and the police, you could say, are really brutal at this present moment. So there is no prospect of an International Monetary Fund loan, there is no prospect of anything more.

I come to your question about Econet, which is run by Strive Masiyiwa, who is in exile, an expatriate Zimbabwean based in London – and, by the way, he is feared by the government, and the government doesn’t like him. He keeps the economy going with Econet and EcoCash, meaning that if you’ve got a liquidity crisis, and of course Zimbabweans do, you can put some kind of credit on your phone and buy things on your phone. It’s a brilliant system and it has worked. But it’s only a Band-Aid.

NOMPU SIZIBA: Barry, time has caught up with us, but thank you very much for the insight. We are going to speak to you more often in the year to catch up on what’s going on in Zimbabwe. We are very, very grateful. Take care.